1. Malik Asim Mansur, 2008 CGAP Photo Contest George Haddad, 2012 CGAP Photo Contest
I N C L U S I O N
S T A B I L I T Y
I N T E G R I T Y
C O N S U M E R
P R O T E C T I O N
Mohammad Gouda, 2013 CGAP Photo Contest
Highlights from the 5th
Arab Policy Forum
10-11 December 2013 | Abu Dhabi, UAE

2. 2
Contents
Introduction 3
Why Inclusion? 4
The Role of Central Banks 6
Stability 7
Integrity 8
Consumer Protection 9
Presenters 10
About the Sponsors 11

3. 3
What unites the Arab World’s top government leaders?
Ask participants at a recent forum hosting the region’s
best and brightest public servants, and you will hear a
consistent theme: Arab countries need to make their
societies more inclusive to more of their citizens. And
financial systems are no exception.
That’s why more than 70 policy makers—representing
central banks, ministries of finance, and financial regu-latory,
supervisory, and standard-setting bodies (SSBs)
from the Arab World—came together at the 5th Arab
Policy Forum on Financial Inclusion. The forum, held
on December 10-11, 2013 in Abu Dhabi, was jointly or-ganized
by the Arab Monetary Fund, the Consultative
Group to Assist the Poor (CGAP), the Deutsche Gesell­schaft
für Internationale Zusammenarbeit (GIZ) GmbH,
and the World Bank.
The aim of the forum was to work toward a common
vision for achieving more inclusive—and more equi-table—
financial systems in the region. Using the I-SIP
framework developed by CGAP and others for the
Global ­Partnership
for fi-nancial
inclusion (GPFI),1
participants explored link-ages
between Financial
Inclusion on the one hand
and financial ­stability,
in-tegrity,
and consumer
Protection on the other.
This eBook highlights key
learning from the Arab
Policy Forum through the
prism of the I-SIP frame-work
as well as provides
“World leaders have
rightly elevated financial
inclusion on the global
development agenda.
Governments and regula-tors
should also do what
they can to facilitate in-clusive
financial systems.
A financial system that
responsibly reaches all
citizens, especially poorer
populations, is an impor-tant
driver for economic
and social progress.”
Tilman Ehrbeck
CEO, CGAP
2013 Arab Policy Forum
additional resources to dig
deeper into the key issues.
For more on financial
­inclusion
topics in the Arab World, including the lat-est
research, visit the CGAP website at
www.cgap.org/countries/middle-east-and-north-­africa
Introduction
1 “GPFI is an inclusive platform for all G20 countries, interested non-G20
countries and relevant stakeholders to carry forward work on financial in-clusion,
including implementation of the G20 Financial Inclusion Action
Plan, endorsed at the G20 Summit in Seoul.” (http://www.gpfi.org/).
Photo: Arab Monetary Fund

4. 4
HIGH-INCOME
ECONOMIES
EAST ASIA
& PACIFIC
EUROPE &
CENTRAL ASIA
LATIN
AMERICA &
CARIBBEAN
SOUTH
ASIA
SUB-SAHARAN
AFRICA
Source: Demirguc-Kunt and Klapper, Measuring Financial Inclusion, 2012.
GLOBAL
AVERAGE
50%
MIDDLE EAST
& NORTH
AFRICA
89
55
45
39
33
24
18
Account penetraon
Adults with an account at a formal financial instuon (%)
It is not for lack of demand that 80 percent of the Arab
World’s adult population do not have access to formal
financial services. Instead, the bottleneck is on the sup-ply
side, where financial service providers—who already
reap profits from real estate, treasury bills, and overseas
investment—have little incentive to serve the lower end
of the market. This, however, is where the majority of
the Arab World’s population lives, and affording them
greater economic opportunities is a priority of govern-ments
across the region.
Creating a more inclusive financial ­system
makes
sense on a number of levels. From a development
perspective, greater financial inclusion is positively cor-related
with GDP growth, and financial deepening has
been proven to reduce inequality. Studies demonstrate,
for example, that access to microcredit increases by 50
percent the chances of hiring employees outside the
household. Financial inclusion also brings down the
cost of delivering public services. These services are
significantly more efficient when ­delivered
through the
financial ­system
(e.g., using plastic cards and electronic
transfers for social benefits can cut costs for the govern-ment
by over 80 percent) as opposed to through more
paper-based mechanisms.
Although financial inclusion is not the panacea to pov-erty,
it remains an important milestone toward more in-clusive
social and economic systems. This would hold
especially true in the Arab World, where 90 percent
of the MSMEs are informal, and where an ­estimated
­number
of 8 million jobs need to be created every year
for the coming ­decade.
82
Percent of the Arab World’s
­population
above 15 years without
access to an account at a formal
The G20 has recognized and
endorsed financial inclusion
as a pillar of the global devel-opment
agenda. Its leaders
have asked global SSBs—
in particular, the Basel
Committee on Banking Su-pervision
(BCBS), the Com-mittee
on Payment and
Settlement Systems (CPSS),
the Financial ­Action
Task
Force (FATF), the Interna-tional
Association of De-posit
Insurers (IADI), and the
International Association
of Insurance Supervisors
(IAIS)—to prioritize linkages
between the overarching
goal of financial inclusion
and their distinct mandates
of ensuring financial stability, integrity, and consumer pro-tection.
These four policy objectives are abbreviated as
“I-SIP” (and are referred to in this e-book as the “I-SIP
framework”).
There is ample evidence that pursuing these linkages
is actually an imperative for governments. IAIS, for
example, in its October 2012 “Application Paper on
Regulation and Supervision
Supporting Inclusive Insur-ance
Markets” states that
anything “less than fully ef-fective
inclusion can, and
financial institution.
“In order to successfully
promote Financial Inclu-sion
in the Arab World,
one major task will be to
further enhance an ena-bling
policy environment
as well as conducive legal
framework conditions. It
is fundamental that it will
be permitted for a broad
set of financial institu-tions
to offer a variety of
financial services to the
poor in a sustainable and
responsible manner.”
Wolfgang Buecker,
Head of Financial Sys-tems
Development, GIZ
2013 Arab Policy Forum
Why Inclusion?
Dig Deeper
10 Useful Data Sources for
Measuring Financial Inclusion
(CGAP)
Account Penetration
Demirguc‐Kunt and Klapper, Measuring Financial Inclusion, 2012.

5. 5
has, led to financial sector instability.” But although
there is broad agreement about the interconnections
between the four policy objectives, at the policy level,
the perceived tradeoffs between inclusion, on the one
hand, and stability, integrity, and consumer protection,
on the other, can hinder policy makers’ ability to opti-mize
I- SIP linkages for the greater benefit of the coun-try.
A CGAP working paper, “­Financial
Inclusion and the
Linkages to Stability, Integrity and Protection: Insights
from the South African ­Experience,”
outlines the need
to look holistically at the I-SIP objectives, rather than at
each one alone, and to apply the principle of propor-tionality
to financial inclusion measures (i.e., balancing
risks and benefits against costs of regulation and super-vision)
to optimize I-SIP linkages. It also calls for policy
makers’ commitment to regularly update policies based
on actual experience and outcomes.
The Role of Financial Service Providers
Ideally, commercial banks would serve poorer custom-ers
and small businesses as effectively as they do their
wealthier clients and large corporations. In reality, prac-tical
examples of extending financial services for the un-banked
at a significant scale involve either postal banks
or microfinance institutions (MFIs) that have transformed
into deposit-taking, regulated financial institutions.
Thanks to their extensive branch outreach, exclusive
technologies (e.g., for money transfers), and their geo-graphic
proximity to clients, postal banks can rapidly
expand financial access and offer financial services both
at scale and at much lower costs for low-income ­clients.
For their part, MFIs are also primed to scale up their ser-vices
because of their established reputations among
poorer and harder-to-reach clients as well as their mecha-nisms
(such as loan officers and rural branches) for reaching
these clients. What these MFIs need is the ability to raise
their own capital, through deposit-taking as well as ex-ternal
­investment—
both of which require their respective
governments’ sanction through licensing and regulation.
In all cases, scaling up the outreach to the underserved
requires two critical elements: (1) engaging in a broad-based
set of consultations with all public and private
stakeholders, be it the central bank, ministries, commer-cial
banks, or other nonbank financial service provid-ers;
and (2) having—or building—a national vision and
­accompanying
goals for increased financial inclusion.
BOX 1. Putting in Place Financial Inclusion Strategies:
5 Key Attributes
Any financial inclusion strategy has five key attributes of
success: (1) political will or high-level commitment; (2)
a lead institution, usually the financial regulator, with a
specialized and motivated financial inclusion team; (3)
coordination among all stakeholders from governmental
institutions and the private sector; (4) a pragmatic action
plan; and (5) accountability.
BOX 2. Postal Banks: Al Barid Bank, Morocco
Al Barid Bank is an impressive example of a postal
bank massively increasing financial access: It opens
500,000 new accounts every year and has contributed
to increasing financial inclusion in the country from 34
percent to 54 percent in just two years—with 70 percent
financial access projected by the year 2015.
Learn more about postal banks in the Arab World:
http://www.cgap.org/sites/default/files/CGAP-Brief-Can-Postal-
Networks-Advance-Financial-Inclusion-in-the-Arab-World-
May-2012.pdf
BOX 3. NGO Transformation: ACLEDA Bank, Cambodia
ACLEDA Bank began as a small project supported by
international aid agencies and providing small loans after
the war in Cambodia. Today, this MFI has transformed
into the largest bank in the country with over $1.2 billion
in assets.
Learn more about MFI transformation:
http://www.cgap.org/publications/ngo-mfi-transformations-ownership-
issues

6. The Role of Central Banks
6
Central banks are key to championing and coordinat-ing
financial inclusion policies. Their staff have both
the skill set and the mandate to oversee several key
items related to financial inclusion: financial regulations
and policies, ­financial
infrastructure, and financial sec-tor
supervision. A World Bank analysis of 56 countries
showed that central banks take the lead on financial in-clusion
strategies in 71 percent of the cases, especially
when the central bank is the integrated financial sector
supervisor. Central banks can do the following:
1. Shepherd the development of a financial inclusion
strategy
2. Contribute to favorable rules and regulations by (a)
encouraging the creation of specialized providers
or enabling existing ones to transform into regu-lated
institutions, allowing them to scale up by rais-ing
capital or, for those meeting specific prudential
criteria, to take deposits; (b) approving alternative
distribution channels for financial services, such as
mobile banking and “branchless” agents
3. Improve financial infrastructure, an area the Arab
Monetary Fund is ­actively
supporting, by (a) estab-lishing
and scaling up the outreach of credit bureaus
and (b) improving payment systems
4. Boost financial literacy among new entrants to the
financial system
Access to finance for SMEs is often a central bank’s entry
point into the financial inclusion landscape. The ­Brazilian
success story started with the aim to bring financial
­services
to MSMEs because they account for more than
20 percent of GDP, 99 percent of formal companies,
and 60 percent of jobs—figures similar to several Arab
­countries.
Brazil broadened this scope to look at the
whole financial sector’s effectiveness and efficiency.
While Brazil remains an international champion of finan-cial
inclusion, several countries in the Arab World have
also begun taking similar measures, led by Morocco,
BOX 4. The Brazil Experience
The Banco Central do Brasil has been working to
increase and improve access to financial services in Brazil
since the 1990s in three main ways: (i) expanding and
strengthening distribution channels for financial services,
(ii) developing instruments to better adapt financial
services to the needs of lower-income segments of the
population, and (iii) guaranteeing the quality of financial
services ­provision.
As a result, it has done the following:
- Increased the number of agent banking outlets from
19,000 in 2000 to 150,000 in 2010
- Focused on strengthening credit cooperatives, leading
to a more then three-fold increase in the number of
cooperative members between 2000 and 2010—from 1.5
million to 5.1 million.
Today, all of Brazil’s 5,565 municipalities have at least
one access point, and the percentage of adults with
an active relationship with a financial institution has
reached 84 percent.
Excerpted from Banco Central do Brasil’s National Partnership
for Financial Inclusion document, “Action Plan to Strengthen the
Institutional Environment” (May 2012).
the first country to have pursued an active financial
inclusion strategy on all fronts by specifically target-ing
the ­low-
income, expanding access points (mostly
through Al Barid Bank), and providing suitable and af-fordable
savings, credit, and payment products (e.g.
­authorizing
­mobile
banking, requiring banks to offer
16 basic ­products
free of charge, and reviewing SME
guarantees requirements). It has done so while catering
for consumer protection through transparency meas-ures,
­supervision
of microcredit providers, and conflict
­resolution
systems.
In other Arab countries, especially those with a vast rural
population, such as Egypt or Yemen, mobile banking is
one of the roads to financial inclusion. ­Others,
such as
Syria and Yemen, have also adopted laws and regula-tions
allowing microfinance banks to operate.

7. 7
There are at least three ways in which inclusion can foster
greater stability in a financial ­system:
•• An inclusive financial sector will have a more
diversified, stable deposit base that should increase
systemic stability. Similarly, inclusion may improve
the diversification of lenders’ portfolios away from
large borrowers, thereby reducing systemic risk.
•• An inclusive financial sector is likely to have greater
political legitimacy and thereby decrease the risk of
­political
and social instability.
•• An inclusive financial sector has the potential to
enhance economic stability, which is an essential
component of financial stability.
Recent research from the World Bank has indeed shown
that countries with more inclusive financial systems are
more resilient to political crisis and instability. Most con-clusively,
this ­research
has shown that countries with
more inclusive financial systems attract a broader base
of deposits, which in turn help them weather financial
shocks better than countries with a preponderance of
large depositors. In part, this is because large depositors,
according to the research, are usually the first to “run on
banks and withdraw their deposits”—a risk that “could
be mitigated if bank deposits are more ­diversified.”
In South Africa, for example, only 30 percent of the popu-lation
participated in the formal financial system in 1994,
according to Roelof Goosen of the South ­African
National
Treasury. By 2005, that number had increased to 55 per-cent;
and by 2013, it had risen again to 79 percent, accord-ing
to FinScope. Evidence suggests that this increase in
inclusion has positive effects on macroeconomic stability.
World Bank research shows
that “a 10 percent increase
in the share of people that
have access to bank ­deposits
can mitigate…deposit with-drawal
rates by about three
to eight percentage points.”
Institutionalizing such stabil-ity
system-wide is a key pri-ority
of Arab governments.
In Jordan, for example,
the Central Bank has pri-oritized
financial ­inclusion
as a means toward greater
systemic stability. Deputy
Governor Maher Hasan ex-plained
that part of this pri-ority
is to attract a broader
deposit base to “include
all segments of society”—a
move that would “reduce
risk exposure” to institu-tions
and, hence, the entire financial system. To this end,
in 2013, the Central Bank established a specialized de-partment
tasked with ensuring the stability of the finan-cial
system by, in part, encouraging greater inclusion.
This new empirical evidence confirms what many had
thought intuitively, that by encouraging more inclusive
products, policy makers help institutions become more
resilient by attracting a
broader base of customers—
which in turn benefits the fi-nancial
system as a whole.
80
Number of jobs, in millions, that the
Arab World will need to create in
the next 15 years.
Stability
“Financial inclusion is
increasingly becom-ing
a high priority for
policymakers in the Arab
World, especially in the
current context of socio-economic
uncertainty,
where many countries in
the region are facing vari-ous
challenges and need
to foster homegrown
sources of employment
and income generation,
particularly by promot-ing
entrepreneurship and
SME development, but at
the same time ensure a
strong financial stability.”
Jassim Al-Mannai,
Director-General and
Chairman of the Board of
the Arab Monetary Fund
2013 Arab Policy Forum
Dig Deeper
Financial Inclusion and
­Stability:
What Does Research
Show? (CGAP)
Common Policy Areas Of National Financial Inclusion Strategies (56 Countries)
63%
61%
59%
50%
39%
Financial literacy
Modifying the regulatory
framework
Data collec on and measurement
Consumer protec on
Mobile banking
Source: World Bank, An Analysis of National Financial Inclusion Strategies, 2013.

8. 8
A financial system’s integrity is gauged not only by an in-dividual
country’s measures to maintain it, but by a set of
internationally agreed on recommendations designed
to curb the global financial system’s misuse, including
through money laundering or the ­financing
of terrorism.
Issued by FATF, these anti-money laundering and coun-tering
the financing of terrorism (AML/CFT) recommen-dations
can seem burdensome to government agencies
focused on their country’s domestic financial system.
Not surprisingly, policy makers differ on what their AML/
CFT priorities should be: Participants in the Arab Policy
Forum were evenly split on whether anonymous trans-actions
below US$100 constitute an ­acceptable
risk
to their financial ­systems’
­integrity.
Despite the range of in-terpretation,
however, a
risk-based implementation
of the FATF recommenda-tions
is an essential ingre-dient
of financial inclusion.
This is especially true given
the scrutiny around cross-border
transfers—such as
the remittances on which
so many of the world’s poor
rely—and related record-keeping
and “know your
customer” due diligence
requirements, especially by financial agents operating
in otherwise underserved areas.
Recognizing that financial exclusion actually increases
AML/CFT risks, FATF has, over the past two years,
made it easier for policy makers to pursue financial in-clusion
goals while putting in place regulations aimed
at preventing money laundering, terrorist financing,
and other financial crimes. Among FATF’s recent
measures is a revision of its
“forty recommendations”
to include expanded defi-nitions
of “low-risk” and
“lower-risk” transactions.
1
Rank of “suspicious transaction
monitoring” as the greatest AML/
CFT challenge in their countries,
according to participants in the Arab
Policy Forum.
Integrity
Polling Participants Opinion on Anonymous Financial
Transactions
Anonymous transacons (no KYC) below US$ 100 are
acceptable low-risk transacons
9% 9%
Strongly Agree
41% 41%
Agree Disagree Strongly Disagree
“The new FATF Recom-mendations
provide
authorities with a stronger
and universal set of meas-ures
to act against threats
to the international finan-cial
system.... They also
strengthen the require-ments
for higher risk situ-ations
and allow countries
to take a more targeted
risk-based approach.”
Giancarlo del Bufalo
FATF President
Letter to G20 Leaders, May
25, 2012
Dig Deeper
Anti-Money Laundering
­Regulation
and Financial
­Inclusion
Hasan Amin, 2012 CGAP Photo Contest

9. Consumer Protection
9
As they push for greater financial inclusion, governments
must ensure that inclusion is achieved responsibly—a goal
that hinges on effective consumer protection measures that
take into account the financial literacy of poorer clients as
well as the ways in which they access information. Densely
worded legal contracts, for example, may be of little use
to customers who have never before dealt with a formal
150
Number of staff members dealing
with consumer complaints at the
­financial
institution. And
some of the terms in those
contracts—annual percent-age
rates, penalties, even the
difference between principal
and interest—may be unfa-miliar
to these customers.
Central Bank of Brazil.
“Over-indebtedness has
been an issue for the past
4,000 years—from Meso-potamia
to Rome, leading
to civil unrest in the latter.
But we still do not know
how to deal with it.”
Nataliya Mylenko
World Bank
2013 Arab Policy Forum
How then can policy makers
­adjust
for these knowledge
gaps while still encouraging
­financial
inclusion?
Research in South Africa suggests that consumer pro-tection
guidelines are best derived by first observing
the ­financial
habits of traditionally unbanked customers.
Policy makers there employed hands-on research tools,
such as mystery shopping and focus groups, to learn
directly from these customers how they manage their
financial lives and assess the gap between what they
need and how existing products are modeled. The re-search
showed that the gap is best addressed through
a single government agency with the sole mandate of
protecting financial consumers. World Bank research
has also shown that an integrated agency is the most
predominant model, globally, for regulating financial
consumer protection.
Still, consumers need to take responsibility for their own
financial choices. This underscores the importance of
financial literacy programs,
Dig Deeper
such as those discussed in
Implementing Consumer
this CGAP blog post.
­Protection
(Technical Guide)
Reaza Golchin, 2012 CGAP Photo Contest Ceasar Alwarda, 2012 CGAP Photo Contest
Legal responsibility for financial consumer protection
between 2010 and 2013
46
74
0 20 40 60 80 100
2013 2010
97
70
Agency is responsible
for financial consumer
protecon (no separate unit)
Agency has a dedicated unit
for consumer protecon
Note: Data for 109 countries with data for 2010 and 2013.
Source: World Bank, Global Survey on Consumer Protection and
Financial Literacy, 2013.

10. 10
Presenters
The following presenters participated in the 5th Arab Policy Forum on Financial Inclusion. Where available, links to
their presentations are included below and are provided as a courtesy by the presenters.
Financial Inclusion in the Arab World Today
Ms. Nadine Chehade, MENA Representative, CGAP [EN]
Client Protection and Consumer Behaviour
Dr. Penelope Hawkins, Managing Director, Feasibility Ltd, South Africa [EN]
Ms. Nataliya Mylenko, Senior Financial Sector Specialist, World Bank [EN]
Mr. Johannes Majewski, Programme Coordinator, GIZ, Moderator [EN]
Reflections from Financial Service Providers Serving the Poor
Mr. Redouane Najm-Eddine, Chairman of the Management Board, Al Barid Bank, Morocco [EN | AR]
Mr. Kim Vada, General Director, Banking Supervision, National Bank of Cambodia [EN]
Ms. Sahar Tieby, Executive Director, Sanabel, Moderator
I-SIP Framework
Ms. Kate Lauer, Lawyer, CGAP [EN | AR]
Financial Inclusion and Financial Integrity
Mr. Adel Al Qulish, Executive Secretary, MENA FATF [EN]
Mr. Michael Tarazi, Senior Policy Specialist, CGAP, Moderator [EN]
Financial Inclusion and Stability
Mr. Martin Melecky, Senior Financial Economist, World Bank [EN | AR]
Mr. Roelof Goosen, Director for Financial Inclusion, South Africa National Treasury [EN]
H.E. Dr. Maher Sheikh Hasan, Deputy Governor, Central Bank of Jordan [EN]
Ms. Kate Lauer, Lawyer, CGAP, Moderator [EN | AR]
Role of Central Banks in Advancing Financial Inclusion
Ms. Jihan El Menzhi, Head of Banking Department, Ministry of Finance, Morocco [AR]
Ms. Denise Dias, Bank Examiner, Market Conduct Supervision, Central Bank of Brazil [EN]
Mr. Nabil Al-Montaser, Acting Deputy Governor, Central Bank of Yemen [AR]
Ms. May Abulnaga, Regulations Department Head, Central Bank of Egypt [AR]
Mr. Yisr Barnieh, Chief of the Financial Markets Division, Arab Monetary Fund, Moderator

11. About the Sponsors
Arab Monetary Fund
Headquartered in Abu Dhabi and founded in 1976, the Arab Monetary Fund is a Regional Arab organization
­dedicated
to correcting and balancing the payment of its member states; removing payment restrictions between
members; improving Arab monetary cooperation; encouraging the development of Arab financial markets, paving
the way for a unified Arab currency; and facilitating and promoting trade between member states. Its 22 member
countries include: Jordan, the United Arab Emirates, Bahrain, Tunisia, Algeria, Djibouti, Saudi Arabia, Sudan, Syria,
Somalia, Iraq, Oman, Palestine, Qatar, Kuwait, Lebanon, Libya, Egypt, Morocco, Mauritania, Yemen, and Comoros.
More information can be found at www.amf.org.ae.
The World Bank
Established in 1944, the World Bank Group is headquartered in Washington, D.C. The World Bank Group has set two
goals for the world to achieve by 2030: End extreme poverty by decreasing the percentage of people living on less
than $1.25 a day to no more than 3%; and promote shared prosperity by fostering the income growth of the bottom
40% for every country. The World Bank is a vital source of financial and technical assistance to developing countries
around the world. It is not a bank in the ordinary sense but a unique partnership to reduce poverty and support devel-opment.
The World Bank Group comprises five institutions managed by their member countries. More information
can be found at www.worldbank.org.
CGAP
Established in 1995 and housed at the World Bank, the Consultative Group to Assist the Poor (CGAP) combines a
pragmatic approach to market development with an evidence-based advocacy platform to advance poor people’s
access to finance. Its global network of members includes over 30 development agencies, private foundations, and
national governments that share a common vision of improving the lives of poor people with better access to finance.
CGAP develops innovative solutions for financial inclusion through practical research and active engagement with
financial service providers, policymakers, and funders. More information can be found at www.cgap.org.
GIZ
The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH supports the German Government
in achieving its objectives in the field of international cooperation for sustainable development with the Federal
­Ministry
of Economic Cooperation and Development (BMZ) being its main client. GIZ is also engaged in international
­education
work around the globe. More information can be found at www.giz.de/en.